REPORT TO COUNCIL
SUBJECT
Title
Adopt Proposed Utility Rate Increases for Fiscal Year 2026/27 Rates for Water, Wastewater, and Solid Waste Utilities for Service Provided to Customers Within and Outside City Boundaries; and Finding of California Environmental Quality Act (CEQA) Exemption Pursuant to Public Resource Code Section 21080(b)(8) and CEQA Guidelines Section 15273
Report
REPORT IN BRIEF
As part of the annual review of the financial condition of the utility enterprise funds, staff recommends that the City Council adopt changes to utility rates. This report presents an analysis of the current utility policy framework, revenues, expenditures, revenue requirements, and utility rates for the City’s water, wastewater, and solid waste utilities.
The recommended increases are 7.5% for water rates, 7% for wastewater rates, and 3% for solid waste and recycling rates. While individual utility costs will vary based on actual use or subscription level, a typical monthly single-family residential water, wastewater (sewer), and solid waste (garbage) utility bill will increase by 6.2%, or $12.43, as broken down below:
Water $5.89
Wastewater $5.09
Solid Waste and Recycling $1.45
Total $12.43
Detailed single-family rate comparisons are included as Attachment 1, and commercial rate comparisons are provided as Attachment 2. It is essential to note that different cities fund different suites of services with their utility fees, so care must be taken when comparing average rates.
The proposed rate changes are included in the FY 2026/27 Recommended Budget. Each year, staff provides the Council with not only proposed rates but also planned rate changes over the next twenty years.
The proposed increase in water rates is primarily due to rising costs of purchased water and necessary infrastructure improvements. Wastewater rates are increasing in large part to fund the Sunnyvale Cleanwater Program, which is a long-term project to replace the City’s aging Water Pollution Control Plant. Solid waste rates are increasing to meet the state's increased regulations, which require additional services to boost organics recycling and reduce the amount of waste sent to landfills.
BACKGROUND
Sunnyvale utility rates are based entirely on the City’s costs for operating and maintaining its water, wastewater, and solid waste facilities and services. Each utility is operated as an independent enterprise, and all expenses and revenues for each service are accounted for in separate funds. State law requires that all fees collected by each utility be used within that utility and not for unrelated services.
Each year, as part of the budget process, staff analyze the current condition and long-term outlook of the City’s utility funds. These analyses are reflected in the long-term financial plans for each fund. They include a review of available fund balances, state and federal environmental requirements, revenues, anticipated capital, infrastructure and operational requirements, and a detailed inspection of significant expenditure areas (e.g., the anticipated cost of purchased water, environmental regulations related to wastewater discharge, the cost of the City’s solid waste collection contract with Bay Counties Waste Services, etc.). The results of these analyses lead to proposed rate adjustments that will generate the revenue necessary to meet planned expenditures. It is essential to note that long-term planning and the use of rate stabilization reserves enable the City to maintain stable utility rates while providing high-quality, reliable, and efficient services by spreading the effects of anticipated operational, capital, and infrastructure costs over multiple years.
Public Noticing Requirements
In accordance with Proposition 218, notices of proposed utility rates were mailed on May 1, 2026. Proposition 218 requires that, should the Council receive written protests from a majority of customers, the proposed rates will not become effective, and the current rates will remain in place.
Staff will tabulate the protests received before the meeting, add any valid written protests received during the meeting, and summarize the total number for the Council. A majority exists if approximately 15,000 valid written protests are received from the properties subject to the proposed fee. One vote will be counted for any property owner or utility customer who submits a protest before the end of the noticed public hearing (one protest per parcel). No protest received after that time, even if postmarked before that time, will be accepted. Each protest must be in writing and identify the affected property by assessor’s parcel number, street address, or utility account number. Oral comments at the public hearing will not qualify as a formal protest unless accompanied by a written protest. Protests received from residents who are neither property owners nor utility account holders will not be counted.
As of June 11, staff have received 84 protests that fall primarily into three categories: (1) 48 protests cited financial hardship due to fixed/low income, rising costs and/or inflation; (2) 21 protests urged the City to find alternatives to increasing rates through operational efficiency or other budget areas; and (3) 32 generic protests did not cite a specific reason. Note that some protest letters cited multiple reasons. Staff will provide an updated protest count at the meeting on June 16.
EXISTING POLICY
Sunnyvale Municipal Code sections 12.16.020 (Wastewater), 12.24.010 (Water), and 8.16.100 (Solid Waste) authorize the City Council to establish by resolution fees and charges based on cost influencing factors.
Policy 7.1I.1a.5 of the Council Policy Manual states: “The user fees established for each utility will be reviewed annually and set at a level that will support the total costs of the utility, including direct and indirect costs and contributions to reserves set by Council policy.”
ENVIRONMENTAL REVIEW
Public Resource Code Section 21080(b)(8) of the California Environmental Quality Act (CEQA) and CEQA Guidelines Section 15273 provide that CEQA does not apply to the establishment, modification, structuring, or approval of rates, tolls, fares and other charges by public agencies which the public agency finds are for the purposes of (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment or materials; (3) meeting financial reserve needs and requirements; and (4) obtaining funds for capital projects necessary to maintain current service levels.
DISCUSSION
Water Rates
Water rates pay for the safe and reliable delivery of water to most Sunnyvale residents and businesses. The Water Supply and Distribution Fund (Attachment 3) accounts for all revenues and expenses related to the City-operated water utility. Expenses include wholesale water costs, capital and infrastructure project-related costs, debt service, and operating costs. Revenues consist of service fees for water and recycled water, water-related public works and construction fees, and interest income. After expenditure levels are established, water rates are set to generate sufficient revenue to maintain the fund in a long-term, sustainable financial position.
The largest component of the Water Fund’s revenue requirement is the cost of purchasing water. The cost of purchased water accounts for approximately 62% of the total fund requirements for FY 2026/27. Sunnyvale currently receives water from four different sources. The majority of the City’s water supply is split between two suppliers: approximately 56% of potable water deliveries are projected to come from the Hetch-Hetchy system operated by the San Francisco Public Utilities Commission (SFPUC), and approximately 42% from the Santa Clara Valley Water District (Valley Water). The remaining 2% comes from well water. Well water is used minimally, primarily to circulate water through the system to keep the wells fresh and operational in the event they are needed during an emergency. The City also typically produces recycled water at the City’s Water Pollution Control Plant (WPCP). However, due to algae issues, the City has not been able to produce recycled water in recent years.
Staff strives to purchase water at the lowest possible cost. The City’s water system allows the movement of potable water from one area of the City to another. Staff monitors and adjusts purchases based on demand and the ability to utilize the most cost-effective sources, balancing this with the minimum contractual requirements for purchases. These minimum purchase requirements, also known as “take or pay” provisions, are in Sunnyvale’s agreements with both wholesalers. The City’s agreements with each wholesaler specify a minimum quantity of water to be purchased each year; if this quantity is not met, Sunnyvale is liable for the difference up to the minimum amount.
Over the past few years, Sunnyvale has experienced less rainfall than expected. Totals were lower this year, but water supply levels remain adequate due to the storage of rainwater from recent wet winters. However, it is expected that the next drought is likely imminent based on historical rainfall patterns in the Bay Area.
The financial plan assumes minimal growth in water demand over the next twenty years, based on continued conservation and the potential for future drought restrictions to limit demand.
Both the SFPUC and Valley Water provided projections of wholesale rates. The projected increases do not reflect changes in the Bay Area Water Supply & Conservation Agency (BAWSCA) Surcharge or any other costs related to water purchases. These projections are included in the base rate for the long-term rate projections in the twenty-year financial plan. The table below presents the proposed projections for both agencies, along with a cumulative percentage increase, using FY 2025/26 as the base year. This indicates that over the next ten years, the total cost of wholesale water is projected to increase by 110.8% from its current level.
|
Projected Increases in Base Wholesale Rates |
|
Fiscal Year |
SFPUC |
Valley Water |
Cumulative Impact1 |
|
2025/26 |
2.3% |
9.9% |
|
|
2026/27 |
6.9% |
9.1% |
10.0% |
|
2027/28 |
6.9% |
9.1% |
20.1% |
|
2028/29 |
3.2% |
9.1% |
31.0% |
|
2029/30 |
2.1% |
9.1% |
42.1% |
|
2030/31 |
4.3% |
7.4% |
53.2% |
|
2031/32 |
5.3% |
7.4% |
65.8% |
|
2032/33 |
5.1% |
7.4% |
79.4% |
|
2033/34 |
2.7% |
7.4% |
91.6% |
|
2034/35 |
3.8% |
7.4% |
98.7% |
|
2035/36 |
0.3% |
7.4% |
110.8% |
1. Column represents the cumulative increase in the total cost for water from both suppliers from FY 2025/26 as the base year, including consumption growth.
Based on the rate increases listed above, the anticipated cost of SFPUC water for FY 2026/27 will increase by 6.9% to $2,714 per acre foot, while the anticipated cost of water from Valley Water is expected to grow 9.1% to $2,788 per acre foot. In addition, the City incurs charges from Valley Water for pumping groundwater from City wells. The unit cost of well water is also influenced by the power costs of running the pumps. The projected total unit cost of well water (including tax and power) for FY 2026/27 is $2,885 per acre-foot, an 8.6% increase over the current year's unit cost of $2,656.
It is possible that the wholesale water providers could adopt mid-year rate increases. Should that occur, a provision was included in the City’s required Proposition 218 notice that would allow the City to pass those costs on to customers. This provision is a pass-through charge that will pass on the higher cost of water procured for the remainder of the year to the City’s water customers. The formula to calculate the surcharge, if needed, is as follows: the total expected cost increase for wholesale water purchases through the fiscal year-end, divided by the total budgeted expenditures for the purchase of wholesale water for the remainder of the fiscal year. The percentage increase determined by this calculation will be applied to utility bills as a surcharge for each unit of water used for the balance of the fiscal year (ending June 30, 2027).
If the wholesalers do not implement any mid-year rate increases, no surcharge will be assessed. If it is necessary for the City to implement the pass-through charge, the City will send notice to water customers at least 30 days before the additional fee takes effect. While this surcharge provision will prevent any negative impact on the Water Fund from potential mid-year increases, it could result in higher-than-anticipated utility charges for the City’s water customers. This surcharge has not been utilized in the past and is unlikely to be needed in the coming year. However, we keep this option should a provider make an unexpected change, which would be more likely in extreme drought conditions.
Operations and Capital Expenses
The FY 2026/27 Budget for the Water Fund also includes approximately $12.8 million for personnel and other costs related to the operation and maintenance of the water supply and distribution system. Additionally, the Water Fund contains annual debt service of approximately $1.2 million in FY 2026/27, primarily for payment of the City’s Water Revenue Refunding Bonds, Series 2017.
A new project was added in FY 2025/26 to deploy automated meter infrastructure (AMI) in Sunnyvale. The AMI project will modernize meters with newer technology that enables remote meter reading and consumption tracking. They will provide valuable customer service to help consumers identify issues early and prevent large water bills resulting from leaks. The FY 2026/27 financial plan has assumed issuance of additional debt to help fund the AMI project while minimizing the immediate impact on ratepayers.
Renovating water infrastructure is a significant contributor to water utility costs. The City has been addressing its aging water utility infrastructure for several years. Like most municipalities in California, a significant portion of Sunnyvale’s water storage and distribution system is outdated and in need of substantial rehabilitation. The highest priority has been placed on the City’s approximately 350 miles of water lines, many of which need replacement. Approximately $118 million in expenditures are planned over the next twenty years. These pipe replacements are necessary to minimize water service interruptions that could result from potential failures of the aging infrastructure.
As required by City policy, the Water Supply and Distribution Fund maintains a Contingency Reserve of 25% of its operating expenses and a Rate Stabilization Reserve to stabilize rates and mitigate the effects of economic fluctuations. This Fund also contains reserves for revenue-funded and debt-funded projects to manage the flow of these funds relative to project expenditures, which are inherently uneven.
Recommended FY 2026/27 Water Rate
The proposed Water Supply and Distribution Fund Long-Term Financial Plan (Attachment 3) reflects a 7.5% increase in the water rates for FY 2026/27. The projected rate increases anticipated over the remaining 20 years are shown at the bottom of the Water Supply and Distribution Fund Long-Term Financial Plan. Council may also elect to implement any rate lower than the staff recommendation. Any increase larger than the staff recommendation would be subject to additional notice, as required by Proposition 218.
Attachment 1 shows monthly residential utility bill comparisons for single-family residences for FY 2026/27. The detailed Water Rate Survey is presented as Attachment 4. The City’s residential water rate remains competitive when compared with neighboring cities.
Wastewater Rates
The City owns and operates an extensive system for managing wastewater within City limits and in a small area in northern Cupertino and San Jose. Wastewater rates cover the safe and reliable removal and treatment of wastewater from all residences and businesses in Sunnyvale, as well as those in the area serviced outside the City. Wastewater rates also cover the costs of non-point source pollution prevention and other essential public services. The Wastewater Management Fund (Attachment 5) accounts for the revenues and expenses associated with the City's wastewater collection and Water Pollution Control Plant services.
The system includes approximately 290 miles of sewer pipes and a 29.5 million gallon per day Water Pollution Control Plant (WPCP). Its operations include the transportation of sewage to the treatment plant, wastewater treatment, the production of recycled water, industrial discharge inspection and enforcement, and other services related to wastewater management. It is important to note that the City’s WPCP is classified at the highest possible grade, and that the discharge requirements for Sunnyvale are among the most stringent anywhere due to the ecological sensitivity of the San Francisco Bay.
Operations and Project Expenses
The proposed FY 2026/27 operations expenses reflect personnel, chemicals, and other costs. Additionally, the wastewater utility is facing significant infrastructure challenges. The most notable is the WPCP renovation. The WPCP Master Plan, approved by Council in 2016, serves as a long-term guide for replacing the WPCP’s facilities and operations. The projects described in the Master Plan are now being implemented as the Sunnyvale Cleanwater Program. The recommended FY 2026/27 Budget includes planned infrastructure expenditures of approximately $1.1 billion over the twenty-year resource allocation plan, with approximately $1 billion allocated to the Cleanwater Program.
The Cleanwater Program is progressing through Phase 1 projects. Rehabilitation of the WPCP is ongoing, with Plant rehabilitation broken out into multiple packages. The first package, which involved rehabilitating the secondary and tertiary treatment facilities, commenced construction in 2023 and is anticipated to be completed in early 2027. The other packages include completing the design for the western perimeter wall and scoping the upgrading of the pipelines connecting the oxidation ponds to the main plant.
Phase 2 of the Cleanwater Program is also under construction and reached a milestone with the completion of the Site Preparation Project in early 2026. These projects include a mechanized secondary treatment system, a thickening and dewatering facility, a temporary maintenance building, and yard piping improvements. This phase also includes a new Cleanwater Center, comprising a laboratory, maintenance, and office building for staff who manage, operate, and maintain the plant. Phase 2 is planned for completion by the end of 2029.
Phase 3 of the Cleanwater Program is well underway with two key planning efforts: (1) an update to the Master Plan, incorporating recent changes in regulations, technology, policy, and growth projections; and (2) a condition assessment of the yard piping on the western half of the plant. The design for replacing the aging cogeneration facility has also begun. Upcoming projects in this phase include expanding digestion capacity, improving gas management, and adding features to handle food waste.
The Sunnyvale Cleanwater Program also includes budget for Program Management Services and for Construction Management. The Program Management Consultant is responsible for quality assurance related to engineering and will assist the City in evaluating technical recommendations for equipment selection and design features. This consultant also provides oversight and coordination for overall program implementation, including establishing, maintaining, and tracking project budgets and schedules. The Construction Management Consultant provides additional technical, engineering, and project support, including contract review, construction oversight, inspection services, quality assurance testing, construction schedule and budget management, construction coordination, meeting management, and records management, to deliver projects within the program.
In addition to the work on the WPCP, a high priority has been placed on improvements to the sewer infrastructure. The City’s wastewater collection system requires significant rehabilitation due to its age. The FY 2026/27 Budget includes $36.7 million over 20 years for sanitary sewer pipe improvements, as well as $4.4 million for emergency repairs.
In the first year of the financial plan, approximately $2 million in annual debt service payments are included for the 2017 Wastewater Revenue Refunding Bonds. There is also approximately $1 million in debt service to cover a loan from the General Fund, which is scheduled to be paid in full by the end of FY 2027/28.
There are three types of debt service tied to the Cleanwater Program. The first is repayment of the Clean Water State Revolving Fund (SRF) Loan program for the Primary Treatment Facilities. This payment is $5.3 million in FY 2026/27 and increases to approximately $20.2 million annually in FY 2027/28, continuing for the duration of the financial plan. The second is the Water Infrastructure Finance and Innovation Act (WIFIA) loan repayment, with payments starting in FY 2029/30 at approximately $1.9 million, increasing to $3.8 million the following year, and continuing for the duration of the Plan. This loan was structured to backload principal payments starting in FY 2054/55, providing near-term flexibility to finance the remaining portion of the project. The remaining Cleanwater Program debt service covers planned traditional revenue bonds totaling $256 million, which would fund projects not covered by the other two loans. Debt service assumptions in the financial plan are revised annually, as expected amounts may change due to the timing of funding needs or the identification of alternative funding sources.
The Wastewater Management Fund, by policy, maintains a Contingency Reserve of 25% of operations and a Rate Stabilization Reserve to normalize rates and accommodate economic cycle fluctuations. The Fund also contains a capital and infrastructure reserve, set at a minimum of 10% of service fee revenue, and a debt service reserve based on the bond covenants of issued or anticipated debt.
Wastewater Rates for Customers Outside the City
In addition to the City’s wastewater customers within the City limits, there are 1,729 parcels located outside the city limits that are serviced by the City’s wastewater collection and treatment system.
In the mid-1950s, the area known as Rancho Rinconada was being developed as a predominantly single-family residential neighborhood. At the time, this area was in a pocket of the County without direct access to a sewer collection system. The City of Sunnyvale entered into a series of agreements with the developers, allowing the Rancho Rinconada sewer system to be tied into a 15-inch City sewer main that was extended 1.7 miles for this purpose.
The agreements required developers to construct sewers that met the City’s standards, allowing the City to collect fees from homeowners and businesses to reimburse itself for the costs of providing ongoing sewer service.
In accordance with legal requirements for the collection of fees on the property tax roll, tonight’s public hearing also includes the proposed charges for wastewater services provided by the City to properties located outside the City limits. Details of the preliminary charges for FY 2026/27 for each property outside the City are included as Attachment 9. A map of the service area outside the City is provided as Attachment 10.
Proposed charges for all customers in the outside sewer area are equal to the City’s proposed charges for customers within City limits, plus a 1% administrative fee charged by the County for processing.
Recommended FY 2026/27 Wastewater Rate Increase
The revenue increase required for wastewater services for FY 2026/27 is 7%. Annual rate increases for the remainder of the planning period are shown at the bottom of the Wastewater Management Fund Long-Term Financial Plan (Attachment 5).
The City’s detailed Wastewater Rate Survey is presented as Attachment 6.
Solid Waste Rates
The Solid Waste Management Fund (Solid Waste Fund) accounts for the revenues and expenses related to the collection, recycling, and disposal of solid waste generated within Sunnyvale. Bay Counties Waste Services, doing business in Sunnyvale as Specialty Solid Waste & Recycling (Specialty), and the City executed an exclusive franchise for the collection of solid waste and recyclable materials on March 16, 2021, and the term of the agreement is from July 1, 2021 through June 30, 2036. Operations of the Sunnyvale Materials Recovery and Transfer Station (SMaRT Station®) and disposal of refuse at the Kirby Canyon Landfill are included in a separate fund, and the City’s share of these expenses and revenues is reflected in the Solid Waste Management Fund.
The City’s franchise with Specialty is the largest single expense within the Solid Waste Fund, accounting for 45% of the total expenses in the FY 2026/27 Recommended Budget. The City’s payment is primarily driven by actual expenditures from the last full fiscal year, adjusted for various indices as specified in the contract. With a new agreement in place that began in FY 2021/22, costs also include numerous new services, such as expanding yard waste and food scraps collection to additional customers. These service changes are necessary to meet diversion goals and maintain compliance with Senate Bill (SB) 1383. The additional services required by SB 1383 have significantly increased contract costs. The projected FY 2026/27 contractor payment is $33.6 million.
The Fund also includes a project to implement the City’s Zero Waste policy. The project includes $4.8 million to fund outreach for practices aimed at meeting both existing organics and recycling regulations for the commercial and multi-family sector (AB 1826 and AB 341), new regulations requiring the collection of organics from all sectors (SB 1383), and the Zero Waste Strategic Plan goal of 90% diversion by 2030.
This project does not account for the costs required to achieve a 90% diversion rate by 2030, due to uncertainty about the legal and technical barriers to meeting the goal. Methods planned to increase the diversion rate include the implementation of new SMaRT Station equipment, programs related to food scraps and commercial yard trimmings, and Citywide multifamily recycling. The current FoodCycle program is also part of the City’s zero waste efforts.
Annual debt service expenditures of $2 million reflect Sunnyvale’s portion of the debt service for the SMaRT NexGen project, which will replace and upgrade the existing SMaRT Station equipment. Annual debt service is expected to increase to $2.8 million starting in FY 2028/29 to reimburse the Wastewater Management Fund for a portion of the Cleanwater Program project that will help process food scraps.
By fiscal policy, the Solid Waste Fund maintains a Contingency Reserve of 10% of operations. This is less than the 25% required for the Water and Wastewater Funds, reflecting that this operation has less City-owned infrastructure at risk of damage or disaster. The Fund also maintains a Rate Stabilization Reserve, similar to that of the Water and Wastewater utilities.
Solid waste rates are set to recover the City’s cost of providing service to customers. To verify that the cost of the services provided is accurately reflected in each customer group’s utility rates, staff periodically conduct rate studies for each of the City’s enterprise funds, with the last study completed in FY 2024/25. The FY 2025/26 fee schedule incorporates a 3% revenue increase needed to sustain the fund for FY 2026/27.
Sunnyvale Materials Recovery and Transfer (SMaRT) Station Fund
In 1992, the City entered into a Memorandum of Understanding (MOU) with the cities of Palo Alto and Mountain View to operate the SMaRT Station. The City entered into a new 15-year MOU with Mountain View, but Palo Alto is no longer a partner as of January 1, 2022 (RTC No. 21-0082). The cities that participate in the SMaRT Station have individual agreements with Waste Management, Inc. for landfill disposal at the Kirby Canyon Landfill in Morgan Hill. Sunnyvale and Mountain View agreed to deliver all their garbage and residential recyclables, including yard trimmings, to the SMaRT Station. A new operating agreement with Bay Counties Smart for a term of 7.5 years was approved by the Council on November 9, 2021 (RTC No. 21-0788).
Sunnyvale’s share of SMaRT Station costs is included in the Solid Waste Fund. Historically, Sunnyvale has covered approximately half of the SMaRT Station's operating expenditures and has received about half of the revenue the cities earn from recyclables removed from the garbage. This share increased to approximately 73% following Palo Alto’s departure from the partnership. Starting in FY 2026/27, Cupertino will begin utilizing the SMaRT Station for its community under a recent 20-year merchant agreement. It is anticipated that by FY 2027/28 (the first full year Cupertino will utilize the SMaRT Station), revenue from the merchant agreement will be approximately $3.2 million.
The SMaRT Station Operations Fund was established to account for the facility's operations. It receives revenue from charges to the cities of Sunnyvale (Solid Waste Fund) and Mountain View, as well as from the sale of recyclables. Major operating cost components include the SMaRT Station operator contract, disposal fees, and taxes collected by the Kirby Canyon Landfill. The fund is managed to ensure that annual revenues and expenditures are in balance, and that no fund balance, except for a small debt service reserve, is carried forward to the following year.
A project is underway to replace equipment and infrastructure in and around the SMaRT Station, with a total project cost estimate of $51.4 million. The retrofit project will increase organics diversion and utilize the latest recycling technologies to help achieve the City’s zero waste goals. The City received a $6.6 million state grant in FY 2025/26 to help fund this project, with the remainder financed by the issuance of utility revenue bonds. The annual debt service for the bonds is approximately $2.8 million.
Recommended FY 2026/27 Solid Waste Rate Increase
The proposed Solid Waste Management Fund Long-Term Financial Plan (Attachment 7) includes a recommended 3% rate increase for FY 2026/27. The projected rate increases anticipated over the remaining 20 years are shown at the bottom of the Solid Waste Management Fund Long-Term Financial Plan. As shown in Attachment 1, Monthly Utility Bill Comparisons - Single Family Residential, the City’s residential solid waste and recycling rate is competitive when compared with neighboring cities. The detailed Solid Waste Rate Survey is presented as Attachment 8.
FISCAL IMPACT
The proposed utility rate changes are necessary to maintain the City’s utilities in a sound financial and operational condition and have been incorporated in the FY 2026/27 Recommended Budget. Even with the proposed changes, Sunnyvale’s utility rates remain competitive when compared to current rates charged in other cities.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website. As detailed in the background section of this report, as required by State law (Proposition 218) Sunnyvale issued notices for utility rate increases.
ALTERNATIVES
1. Find that this action is exempt from CEQA pursuant to Public Resources Code Section 21080(b)(8) and CEQA Guidelines Section 15273 because it approves rates and charges for the purposes of (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment or materials; (3) meeting financial reserve needs and requirements; and (4) obtaining funds for capital projects necessary to maintain current service levels.
2. Adopt a resolution increasing water rates by 7.5%, wastewater rates by 7%, and solid waste rates by 3% for FY 2026/27.
3. Adopt rates lower than those proposed in this report.
4. Take no action on rates and leave the existing rates in effect.
5. Continue the hearing to a future date to consider rates higher than those proposed, which would require additional Proposition 218 noticing.
STAFF RECOMMENDATION
Recommendation
Alternatives 1 and 2:
1) Find that this action is exempt from CEQA pursuant to Public Resources Code Section 21080(b)(8) and CEQA Guidelines Section 15273 because it approves rates and charges for the purposes of (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment or materials; (3) meeting financial reserve needs and requirements; and (4) obtaining funds for capital projects necessary to maintain current service levels; and
2) Adopt a resolution increasing water rates by 7.5%, wastewater rates by 7%, and solid waste rates by 3% for FY 2026/27.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
___ Contract between public agencies
_X_ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Stephen Napier, Business and Enterprise Services Manager
Reviewed by: Matt Paulin, Director of Finance
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Combined Monthly Utility Bill Comparisons - Single Family Residential
2. Combined Monthly Utility Bill Comparisons - Commercial
3. Recommended FY 2026/27 Water Supply and Distribution Fund Financial Plan
4. Water Rate Survey
5. Recommended FY 2026/27 Wastewater Management Fund Financial Plan
6. Wastewater Rate Survey
7. Recommended FY 2026/27 Solid Waste Management Fund Financial Plan
8. Solid Waste Rate Survey
9. List of Parcels Outside City Limits
10. Map of Wastewater Service Area Outside City Limits
11. Draft Resolution